Good day, everyone, and welcome to this morning's Belden Incorporated Third Quarter 2016 Earnings Release. Just as a reminder, this call is being recorded. At this time, you're on a listen-only mode. Later, we will conduct a question-and-answer session. I would like to now turn the conference over to your host, Mr. Tim Lenze. Please go ahead, sir.

Thank you, Augusta. Good morning, everyone, and thank you for joining us today for Belden's Third Quarter 2016 Earnings Conference Call. My name is Tim Lenze. I'm part of Belden's Investor Relations team. With me this morning are John Stroup, President and CEO; and Henk Derksen, Belden's CFO. John will provide a strategic overview of our business, and then Henk will provide a detailed review of our financial and operating results, followed by Q&A. We issued our earnings release earlier this morning, and we've prepared a slide presentation that we'll reference on this call. The press release, presentation, and transcript of these prepared remarks are currently available online at investor.belden.com. Before we begin, I'd like to remind our audience that Belden will hold its 2016 Investor and Analyst Day event in Boston on Monday, December 5 at 2 PM Eastern Time. At this event, we'll provide additional insight on our performance and strategy as well as 2017 guidance. Please register on our website if you'd like to join in person. The event will be webcasted live for those of you who are unable to attend and can be accessed via the Belden IR website. Turning to slide 2 in the presentation, during this call, management will make certain forward-looking statements. I'd like to remind you that any forward-looking information we provide is given in reliance upon the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The comments we will make today are management's best judgment based on information currently available. Actual results could differ materially from any forward-looking statements that we make, and the company disclaims any obligation to update this information to reflect future developments after this call. For a more complete discussion of factors that could have an impact on the company's actual results, please review today's press release and our Annual Report on Form 10-K. Additionally, during today's call, management will reference adjusted or non-GAAP financial information. In accordance with Regulation G, we have provided a reconciliation of the most closely associated GAAP financial information to the non-GAAP financial information we communicate. This reconciliation is in the appendix of the presentation and has been posted separately to the Investor Relations section of our website. I will now turn the call over to our President and CEO, John Stroup. John?

Thank you, Tim, and good morning, everyone. As a reminder, I'll be referring to adjusted results today. Please turn to slide 3 in our presentation for a review of our third quarter highlights. We are pleased with our third quarter results including organic revenue growth, margin expansion, and double-digit earnings growth. Our team continues to execute well, and our Lean enterprise system is clearly driving sustainable productivity improvements and strong free cash flow. I'd like to thank our associates for their commitment to aggressively executing our strategic plan. We are also pleased with the timely execution of our mandatory preferred stock issuance in the quarter. This instrument accelerated our debt leverage reduction and provides an opportunity to capitalize on our robust M&A funnel. On an organic basis, we grew revenues by 2.6% to $602.5 million. We benefited from a number of attractive secular trends and captured share in the majority of our businesses. In addition to continued success in our enterprise and broadcast platforms, both of our industrial platforms experienced a return to organic growth as we had expected. EBITDA margins expanded 200 basis points from the prior-year period to 18.5% and are within the range of our long-term goal of 18% to 20%. The significant margin expansion is primarily a result of productivity from our Lean enterprise system, exceeding our previously communicated commitments. The margin expansion was broad based with all platforms contributing. As a result of the solid revenue growth and margin expansion, EPS grew 13% to $1.29 compared to last year's $1.14. Excluding the impact of the newly issued mandatory preferred equity, earnings grew 27%. So far this year, we have generated an additional $58 million in free cash flow compared to the prior year, which is a testament to the quality of earnings and the efficient…

Thank you, John. I will start my comments with results for the quarter, followed by a review of our segment results, discussion of the balance sheet, and close with our cash flow performance. As a reminder, I will be referencing adjusted results today. Please turn to slide 5 for a detailed consolidated review. Revenues in the quarter were $602.5 million, an increase of 2.1% from $590.1 million in the third quarter 2015. Lower copper prices and currency translation had an unfavorable impact of $5 million. A small bolt-on acquisition announced in the first quarter increased revenues by $1.8 million. After adjusting for these factors, revenues increased 2.6% organically from the prior-year period. Sequentially, revenues increased $900,000 from $603.4 million. Gross profit margins for the quarter were 41.6%, increasing 80 basis points from the prior-year period, result of productivity initiatives. Sequentially, gross profit margin declined 20 basis points, within the normal range of variation. Operating expenses of $150.8 million for the quarter decreased $4.5 million from the prior year and $5.5 million sequentially. The improvements are primarily the result of productivity initiatives. EBITDA in the quarter was $111.5 million, an increase of $14 million or 14.4% from the prior-year period. Sequentially, EBITDA increased $3.4 million or 3.1% from $108.1 million. EBITDA margins were 18.5%, an increase of 200 basis points from 16.5% in the prior year and an increase of 60 basis points from 17.9% in the second quarter. For the full year, we expect EBITDA margins to be within our long-term goal of 18% to 20%. Net interest expense of $23.5 million for the quarter decreased $1.9 million from the prior year and $0.5 million sequentially. The year-over-year decrease was driven by a reduction of outstanding debt. We expect interest expense to be approximately $23.5 million for the fourth quarter…

Thank you, Henk. Please turn to slide 9 for our outlook regarding the fourth quarter and full year 2016 results. Our balanced portfolio and proven business system allow us to perform well under a variety of market situations. When paired with our strong balance sheet and optimism around acquisition-related opportunities, we feel confident Belden is well positioned for success. We anticipate fourth quarter 2016 revenues to between $605 million and $625 million, and EPS is expected to between $1.36 and $1.46. For the full year, we now expect revenues to be between $2.355 billion and $2.375 billion from prior guidance of $2.355 billion to $2.385 billion. The expected range of EPS is now $5.20 to $5.30 from prior guidance of $5.15 to $5.35. We look forward to providing insights into our expectations surrounding 2017 at our Investor Day event on December 5. Details can be found at investor.belden.com. That concludes our prepared remarks. Augusta, please open the call to questions.

Thank you, sir. Our first question will come from Noelle Dilts with Stifel. Please go ahead. Noelle Dilts - Stifel, Nicolaus & Co., Inc.: Hi, guys. Good morning.

Good morning.

Good morning, Noelle. Noelle Dilts - Stifel, Nicolaus & Co., Inc.: Congratulations on a nice quarter.

Thank you. Noelle Dilts - Stifel, Nicolaus & Co., Inc.: So I think we do have to dig in a little bit more on Network Security. I guess, first, can you help us understand? I mean, you talked about some of the changes you're making in terms of personnel and sales. Can you just give us a feel for any additional actions you're taking, anything on the product side, or if you think that's really in good shape? And then give us a sense of how to think about this longer term? If I go back, I think you were looking at a 17% CAGR over 2014 to 2017. So how do we think about that today?

Sure. So, I think there are two things to consider. First is if you look at the end markets, we've seen pretty good activity outside of the United States. So we saw good demand in Europe and in Asia. Although that's a relatively smaller percentage of Tripwire's business today, that was strong. We also have seen very strong activity in Industrial, stronger than we expected. As I mentioned, that's up 22% year to date. So that's great. It's now our largest vertical. And at the time that we acquired Tripwire, we made it clear to everybody we thought that was a significant opportunity. And we've made good on that. The part we're struggling with is what I would consider to be sort of the core of the Tripwire business at the time of the acquisition, which was the U.S. commercial business. So this would include retail, banking, insurance, technology companies, things of that nature. We had a fairly difficult comp in the third quarter on a year-over-year basis. We booked a really nice order a year ago, but of course, we took credit for it a year ago, and we have to replace it with new opportunities this year, and we didn't. And I think that's at least partly due to execution. We've not had the sales and marketing team fully staffed through the year. We've had some challenges with being able to bring people on as quickly as we would like as we've expanded the sales team, and that's an area that we need to continue to focus on. So it's an area that's garnering more of my attention, more of my time, trying to make certain that the team understands the expectations, has the tools to be successful. I think it's going to take us a couple quarters…

Yeah. So this is an interesting topic and something that we've been spending more time on in preparation for our December investor meeting, and we'll provide more detail there. But let me give you a preview. So, first of all in the quarter, the Grass Valley business grew 6.5%. So they had another strong quarter. By the way, most of that growth came outside the United States. And you remember a year ago, we mentioned that we were struggling with some headwinds from currency and oil prices, and we're clearly seeing that come back as we thought it would. That's good news. In the U.S., it's flat year over year. And in an election year and in a Olympic year, you might expect the U.S. business to be up, and it's not. If you look at the Broadcast business and you separate it into three value streams, distribution, which is predominantly our PPC business, so this is hardware that's being sold through MSOs and telecom providers to bring the content to the home, whether it's over the top, whether it's traditional, that business has been growing very consistently over the last three years, sort of mid-single-digit growth rates to high single-digit growth rates, really no interruption and we expect that to continue. If you look at playout, playout is about 20%, 25% of the Grass Valley business or about 12%, 12.5% of the Broadcast platform, that's the piece of the business you would think would be most vulnerable to the over-the-top phenomenon. It's actually growing also, and that's because customers continue to make investments in linear playout because it represents more than 90% of their production or of their distribution. That's the area that people most often would assume is under pressure. It's not. The part actually that has been under the most pressure which is not intuitive is creation. And creation would be the area that you wouldn't expect to be under attack because creation is an area where people are making investments. And creation is the area where we've seen customers defer capital so that they can invest in their over-the-top platforms, and we believe that that is a deferral. And we believe that will come back. And as a result, we're not expecting that 2017 will be down compared to 2016 as you would have seen in prior cycles. Some of that is the deferral I mentioned. Some of that is also customers trying to make sense of the IP transition, and we believe that they are in fact getting comfortable with an open standard IP product. We feel that we're extraordinarily well positioned there. And as a result, I would expect that our Broadcast business would be up in 2017 compared to 2016. Noelle Dilts - Stifel, Nicolaus & Co., Inc.: Okay. Perfect. Thanks so much.

You're welcome.

Our next question comes from John Quealy of Canaccord Genuity.

Hey. Good morning, folks. Over to Enterprise, if we could for a moment, another healthy organic growth there. Can you talk about geography? I assume U.S. was a big part of the non-res and on the smart building side, but if you can dig in a little bit more please.

Yeah. So, U.S. was good. Believe it or not, Canada was good. We keep doing really, really well in Canada. I think most of that is Eastern Canada. Asia was fine. I'd say the only area that was weak was Middle East, and by the way, that's I'd say in most of our businesses right now. Middle East business is weakening. I think that's to be expected as countries in the Middle East come to terms with the fact that they're struggling with low oil prices. I would expect the Middle East region to be weak for a while, but yeah, most of it came from the U.S. and Canada.

Okay. Thanks. Let's look back to Network Security for a moment. Just in terms of Q4, are we expecting another good margin seasonal quarter as those perpetual licenses renew or what's the sort of qualitative dynamics we should look for in Q4 there?

Yeah, I'm not at all worried about margins in Tripwire. I think margins are very healthy, will continue to be healthy. I think the challenge for Tripwire in Q4 is going to be the challenge they had in Q2 and Q3 which is going to be non-renewal bookings. So, retention rates are good. They're strong. They're healthy. When customers make a commitment to our products, they tend to stay with us. They are happy. Interestingly, there is a lot of demand for professional services, and a lot of that demand is for licenses that had already been purchased where customers are sort of acknowledging that we're having a hard time putting the products in position or putting them in place. So, I would imagine that in the fourth quarter, margins will be good. I would imagine that renewal rates will be good. I would imagine that professional services are going to be good. And I think the area of focus for us and the area of challenge will be non-renewal bookings.

Okay. And then remind us on the status. I think it was Broadcast introduced a product that bundled some Network Security capabilities. Again, the landscape seems very positive at least from my perspective with – we had that big denial of service attack with the set-top boxes and things like that. So, it certainly seems there are market opportunities there. Just talk to how that initiative is going.

So, the product you're referring to is a Grass Valley playout product called iTX, which is a software-based playout system where we integrated Tripwire technology into that product. iTX sales in general continue to be healthy. I'm not going to be able right now to be able to split out for you how much of that was impacted by Tripwire, but I can report that the product is integrated. I can tell you that customers have responded favorably to it, and I can also tell you the iTX revenue continues to be very healthy.

Okay. Great. And I'm sorry, just one last one back to Broadcast. So, CBS Sports now all IP. Can you give us a life cycle how long it took your efforts to complete that portion of it? What was the sort of cadence there? Thanks, guys.

You're welcome. So, we started working on our IP products in earnest probably early 2015 and certainly have been engaged with a number of customers including CBS Sports very seriously over the last six months. And we were delighted that CBS had confidence in our solutions, gave us the opportunity to work with them. If I remember correctly, this is both at golf as well as football. And we have a number of other high-profile customers as well that are using our IP products. And in fact, we got the greatest compliment we could ever get from a customer, particularly a Broadcast customer, when they told us that the implementation of our IP products was the most boring rollout they had ever had, which obviously, we appreciated.

Our next question comes from Ryan Hutchinson of Guggenheim.

Great. Thanks. Good morning, guys. (34:18).

Good morning, Ryan.

Good morning. I guess, my question here is on the Broadcast business. I understand and appreciate the drivers and the growth for next year that you're expecting, but at the same time, a lot of your key customers including AT&T, Time Warner, and others are in the midst of a massive consolidation phase. And so, I just wanted to see how you guys thought about that in potentially impacting your business and if you factored anything into your guidance around this dynamic that certainly is going to continue.

Yeah. So, AT&T, Time Warner are obviously big customers of ours as is Comcast. And they're big customers of our PPC products. And those are hardware products predominantly connectors that are used outside the home and in the home. And the drivers of those tend to be the need or desire for increased bandwidth or increased usage in the home itself and is not typically CapEx but is usually OpEx. And churn of customers is also a major driver. So, in the past, when there's been consolidation with our customers with either telecom or MSOs, we have on occasion seen some activity with those customers looking to leverage their spend a little bit more with us, which can put a little bit of pressure on our cost actions but at least up to this point, it never affected volume because it's not a CapEx item but rather, it's an expense necessary to deliver the product to their customers. So, if there is any disruption, I would expect it to be more on the margin line than the revenue side. And at least so far, I think the team has been able to mitigate those sorts of activities, and we expect them to do so going forward.

Okay. Great. And then in your prepared remarks, you highlighted a robust M&A funnel a few times and given the recent capital raise. Can you just bring us up to speed on what your latest thoughts are around both areas of focus and potential timing and specifically, if security is still going to be an area of focus following the weaker results that we've seen out of the acquisition, the recent acquisition?

Okay.

Thanks. That's it for me.

Yeah. So, as we commented three – sure. As we commented three months ago, our funnel is in very good shape. We've I think made a lot of progress over the last three months on a number of opportunities that we consider to be highly attractive. And although we consider and continue to believe the Network Security space is a highly attractive space, we don't have any opportunities in the funnel that are near term for Network Security. So, if we were to do something in the near term, which I hope we can and think there is a good chance we can, it would likely be in the Enterprise space or the Industrial space. Those are the two areas where we see the most activity late cycle in the funnel. And of course, nothing is for sure in life, and we have a lot of work to do between now and when we'd be able to announce something, but that's the area where the funnel is most active today.

Great. Thanks, guys.

Thank you, Ryan.

We'll go next to Steven Fox with Cross Research.

Yeah. Thanks. Good morning. John, just a follow-up on those last comments. The last couple of acquisitions you've done have been sort of far afield from the core strengths of the company historically. And you've now had sort of some stumbles in those that are kind of surprising relative to just 90 days ago. So, based on what you just said, are you saying that maybe expanding beyond sort of the traditional hardware interconnect is now probably more limited or would you still consider moving up the stack like you've talked about in the past? And then I had a follow-up.

Sure. So, the last two acquisitions we've done are Tripwire and M2MFX (38:14), and of course, M2MFX (38:16) is a smaller bolt-on acquisition we did (38:20).

I'm sorry. I was actually referring to just getting into Broadcast and getting into Network Security in general. Sorry. I misspoke there.

Oh. Okay. All right. And then as you know, the Broadcast business is a business that Belden has been in for about seven years and an area that we've got a lot of experience with, but you may be referring to the Grass Valley acquisition that was a bolt-on. It's the Miranda acquisition that we made three years earlier. As it relates to our M&A funnel or M&A activities, I guess my response, Steve, would be the following. There's really no change in strategy. Everything that we pursue in the M&A funnel comes out of our strategic plan, and then we pursue it with what we believe to be very strong financial discipline around ROIC. None of that has changed. And of course, as I'm sure you're pointing out, there have been examples of transactions where we've gotten to that ROIC goal faster than we have other ones, and of course, those are always the ones that are most appealing to all of us. I don't see any of that changing. As I made a comment earlier, the areas that are most advanced in the funnel today are in Enterprise and are in Industrial. And those would be I think examples of product lines that you would consider to be core bolt-ons or near adjacencies. They wouldn't be as ambitious, I would say, as the Tripwire acquisition. I guess the other thing I would point out, Steve, is that – and it's difficult to quantify, but there's no question that our Industrial businesses would not have done as well in this quarter if it had not been for the Tripwire acquisition. In fact, if you look at the results of Wesco and Anixter, our two largest distributors, which I think are a reasonable proxy for how the industrial market is doing, they were both down considerably on a year-over-year basis. And I don't know how we would have grown those businesses, which is absolutely in conflict with all of our competitors in the market in general, had we not made the investment in the Tripwire asset.

Yeah, appreciate that color. That's very helpful. And then just two follow-up questions. First, on the networking margins that you just – produced the EBITDA margins, do you consider those sustainable? I guess, it's pretty high considering the sales challenges. And then, secondly, can you just talk about why you think you gained share on the Enterprise side? Because based on my numbers, it seems like you did pretty well there. Thanks.

Yeah, sure. So I would say the margins at Network Security in this quarter were on the very high end of the acceptable range. And part of it was the fact that we don't have a fully populated sales force at Tripwire. And as I mentioned earlier, that's an area that we're focused on. So it's sort of a consequence of some of the execution challenges that we have there. And so I would expect margins to come down a little bit as revenue growth continues. On the Enterprise side, I'd say it's a continuation of what we've been talking about for more than a year. We've got some really, really strong products, particularly in CAT 6A where revenue is up some 20-some percent. It's absolutely amazing to me that the smart building, the connected building, it has – sort of gravitating towards copper products because of Power over Ethernet. Obviously, Power over Ethernet is not something you can accomplish with fiber products. And our team is doing a good job there. The team properly recognized some of the challenges in data centers and reallocated resources. They properly identified some of the buying behavior changes with respect to contractors having more influence. And they're just executing really well. And so, they're in a great group. And I guess I would remind everybody that it wasn't that long ago that 80% of our earnings call was about how are we going to fix the Enterprise business. And now, they're in great shape. A year ago, it was how are we going to fix the Grass Valley business. They're in great shape. And of course, this call we're talking about some of the challenges we have in Network Security, and I look forward to talking about how that's in great shape a year from now.

Great. So do we. Thanks.

Yeah. Thank you.

We'll go next to Shawn Harrison with Longbow Research.

Hey, everyone. This is (42:59).

Good morning. Frank (43:02), we have difficulty understanding you, Frank (43:04).

I'm sorry. What was that?

We have difficulty understanding you. Please speak a little louder.

Can you hear me?

That's better.

Okay. Thanks. Sorry about that. Just going back to networking, just a few questions. One, how much of the miss is internal versus external factors? And do you still expect to hit your accretion targets?

So it's hard for me to know exactly how much of it is market and how much of it is our execution. If you look at some of the other security companies, they have been talking about flat year-over-year market growth rates. Check Point, for example, came out, had sort of flat growth rates. We were down 4%. So, that might be a good proxy. Maybe if our execution was perfect, we would have seen some growth, but not the kind of growth that we would have thought maybe 90 or 120 days ago. That's not a perfect analysis for you, but I think it's directionally correct. And what was your second question? I'm sorry.

Just if you still expect to hit your accretion target?

Yeah. So, we still expect to hit our accretion target for the current year of 2016. That is not in jeopardy. And for 2017, the numbers that the team had submitted to me for next year are still on target for accretion as well. And so, at this point, there is no change in our view or our expectations for accretion from the Tripwire acquisition.

Okay. Thanks. And then just one more quick one. What percent of Tripwire is Industrial now? Because I thought when you bought them, it was closer to zero.

So, the Industrial business on a full-year basis for non-renewal bookings, okay, so this is not revenue, this is non-renewal bookings, is about 20%, 25% of their total revenue. I actually don't know what it was at the time of the acquisition. I have to go back and get that for you. But as I mentioned, it's been an area of growth, and it's been an example of two things, really. One is where Tripwire team has been bringing Belden into opportunities. The Belden team has been bringing Tripwire into opportunities. It includes traditional IT assets on the factory floor being protected. It includes industrial back-office examples, and it also includes what I would consider traditional SCADA-based production like our Tofino Firewall and like some of the other products that we have. So, it's been a real success story for the acquisition. And once we get the core legacy business back on track, I think we'll be in very, very good shape.

Great. Thanks, guys.

Thank you.

Thank you.

We'll go next to William Stein with SunTrust.

Great. Thanks for taking my question. And I joined a little late, so I apologize if this is repetitive. Gentlemen, in the middle of quarter, I think there was a pretty clear stance that an acquisition was imminent. I wonder if something fell out of the funnel or if the pacing of deals might have moderated for some reason. Thank you.

Yeah, nothing changed from our end.

Okay. Next is on leadership in Tripwire. I think you've seen two CEO rotations since you acquired the business. I wonder what the status is to stabilize that.

Yeah, so the first one was planned. At the time of the acquisition, the sitting CEO was clear with us about his intention to retire. The second one was not planned. And we've inserted a Belden executive in that position, somebody that's been with us for quite some time. And I think that's been very helpful. In fact, I think the team has responded. The team at Tripwire has responded extraordinarily well to the change in leadership. And if anything, with the benefit of hindsight, we should have done it earlier. So, I think we're in good shape. And I think they're embracing the Belden business system, and there's lots of examples of where I see the quality of their decisions improving, so I feel like we're in good shape.

Thank you. That's very helpful.

Yes. You're welcome.

And that is all the time we have for questions at this time. I'd like to turn it back to our presenters for any additional or closing remarks.

Thank you, Augusta, and thank you, everyone, for joining today's call. If you have any questions, please reach out to the IR team here at Belden. Our email address is investor.relations@belden.com. Have a good day, everyone.

Thank you, ladies and gentlemen. This concludes our call for today. You may now disconnect, and thank you for your participation.